Nomura says India’s current account deficit CAD) expected to widen to 2.8 pc of GDP this fiscal

India’s current account deficit is expected to widen to 2.8 per cent of the GDP in this financial year, says a Nomura report.

With rising oil prices, depreciating rupee and outflow of portfolio investments, there are concerns that CAD might rise in the current fiscal.

“Overall, we expect the current account deficit to widen to 2.8 per cent of GDP in FY19 from 1.9 per cent in FY18,” the Japanese financial services major said.

It further said that “balance of payment (BOP) funding to remain a challenge in FY19 as the basic BOP (current account + net FDI) is negative and portfolio flows also remain negative”.

CAD, which is the difference between the inflow and outflow of foreign exchange, jumped to USD 48.7 billion, or 1.9 per cent of GDP, in 2017-18 fiscal. This was higher than USD 14.4 billion, or 0.6 per cent, CAD in 2016-17 fiscal.

According to official figures India’s trade deficit, or the gap between exports and imports, in July widened to USD 18 billion, the most in more than five years.

Trade shortfall puts pressure on the current account deficit (CAD), a key vulnerability for the economy.